Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise Duties and Taxes Division
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 195632
Dear [Client]:
Subject: EXCISE INTERPRETATION
Cigars Imported into Canada and […][Country X]
Thank you for the information you provided […] on [mm/dd/yyyy]. We understand […][that you have been provided] with information on the importation of cigars. We are pleased to provide you with the additional information enclosed concerning the importation of […][Country Y] cigars into Canada.
All legislative references are to the Excise Act, 2001 (Act) and its regulations, unless otherwise specified.
We understand that […][A Co] possesses a tobacco licence and an excise warehouse licence issued under section 14 of the Act and does not possess a customs bonded warehouse licence or any other types of licences under the Excise Act, 2001, the Customs Act, or the Customs Tariff.
[A Co] is considering importing cigars from [Country Y] into Canada for subsequent export to […][Country X]. [A Co] will not manufacture cigars in Canada.
[A Co] plans to sell cigars imported from [Country Y] […] in [Country X]. The cigars imported from [Country Y] will be imported into Canada and then exported for sale in [Country X].
[A Co] is also considering importing cigars from [Country Y] into Canada for sale […] in Canada. These cigars would be sold in boxes ranging in quantity from [#] to [#] cigars per box.
INTERPRETATION REQUESTED
You would like to know how to calculate excise duty on cigars imported from [Country Y] for subsequent export to […] in [Country X] and cigars imported for sale […] in Canada.
INTERPRETATION GIVEN
Cigars imported by an excise warehouse licensee for subsequent export
The Act allows an excise warehouse licensee to import unstamped, non-duty paid, cigars for entry into the licensee’s excise warehouse and to subsequently remove the cigars from the excise warehouse for export from Canada. Containers of cigars entered into the excise warehouse must have affixed to them tobacco markings and other prescribed information.
Paragraph 32(2)(b) of the Act allows an excise warehouse licensee to possess unstamped cigars at their excise warehouse and subparagraph 32(3)(d)(i) allows them to sell unstamped cigars that are exported by the licensee in accordance with the Act.
Subsection 38(1) requires containers of manufactured tobacco or cigars entered into an excise warehouse to have printed on them or affixed to them tobacco markings and other prescribed information. Section 3.4 of the Stamping and Marking of Tobacco and Cannabis Products Regulations specifies the required prescribed information to be affixed to or printed on containers of manufactured tobacco or cigars. In the case of cigars imported by a tobacco licensee, the prescribed information to be printed on or affixed to packages is the name and address of the manufacturer who packaged the tobacco product or the name and address of the licensee or their licence number. The prescribed information for cases of cigars is the number of packages in the case and the weight of the tobacco product in each package.
Paragraph 6(1)(b) of the Stamping and Marking of Tobacco and Cannabis Products Regulations specifies the tobacco markings required on containers of manufactured tobacco and cigars manufactured outside Canada as the marking set out in Schedule 8 (“DUTY NOT PAID – CANADA – DROIT NON ACQUITTÉ”).
Paragraph 51(2)(e) allows an excise warehouse licensee to remove imported manufactured tobacco or cigars from their excise warehouse for export in accordance with the Act.
Cigars imported by a customs bonded warehouse for subsequent export
The Act includes provisions that allow persons that are licensed under the Customs Tariff to operate a bonded warehouse (i.e. customs bonded warehouse licensees) to possess unstamped imported manufactured tobacco and cigars in their customs bonded warehouse and to sell or offer to sell imported manufactured tobacco or cigars that are exported by the licensee in accordance with the Act.
Subsection 38(2) requires containers of imported manufactured tobacco or cigars delivered to a customs bonded warehouse to have affixed to them tobacco markings and other prescribed information. Section 3.4 of the Stamping and Marking of Tobacco and Cannabis Products Regulations specifies the required prescribed information to be affixed to or printed on containers of imported manufactured tobacco or cigars. In the case of cigars imported by a tobacco licensee, the prescribed information to be printed on or affixed to packages is the name and address of the manufacturer who packaged the tobacco product or the name and address of the licensee or their licence number. The prescribed information for cases of cigars is the number of packages in the case and the weight of the tobacco product in each package.
Subsection 7(1) of the Stamping and Marking of Tobacco and Cannabis Products Regulations specifies the tobacco markings required on containers of imported manufactured tobacco or cigars delivered to customs bonded warehouses as the marking set out in Schedule 8 (“DUTY NOT PAID – CANADA – DROIT NON ACQUITTÉ”).
You may contact the Canada Border Services Agency (CBSA) for additional information on the Customs Tariff and customs bonded warehouse licences. Contact information for the CBSA is available at: cbsa-asfc.gc.ca/contact/bis-sif-eng.html.
Cigars imported for sale in Canada
Subsection 35(1) requires cigars imported into Canada to be, before being released under the Customs Act for entry into the duty-paid market, packaged in a package that has printed on it prescribed information and be stamped. […].
Section 3.1 of the Stamping and Marking of Tobacco and Cannabis Products Regulations specifies the prescribed information that must be printed on packages of imported tobacco products or raw leaf tobacco for purposes of subsection 35(1). In the case of cigars imported by a tobacco licensee, the prescribed information is the name and address of the manufacturer who packaged the tobacco product or the tobacco licensee’s name and address or their licence number.
Duty is imposed on cigars imported into Canada under section 42 at the rates specified in Schedule 1. The current rate of excise duty is $25.95832 per 1,000 cigars. In addition to the duty imposed under section 42, duty is imposed on cigars at the rates specified in Schedule 2. The current rate of additional duty specified by Schedule 2 on imported cigars is the greater of $0.09331 per cigar and the amount obtained by multiplying the duty-paid value by 88%.
“Duty-paid value” is defined in section 2 as:
(a) in respect of imported cigars, the value of the cigars as it would be determined for the purpose of calculating an ad valorem duty on the cigars in accordance with the Customs Act, whether or not the cigars are subject to ad valorem duty, plus the amount of any duty imposed on the cigars under section 42 of this Act and section 20 of the Customs Tariff; and
(b) in respect of imported cigars that, when imported, are contained in containers or otherwise prepared for sale, the total of the value of the cigars as determined in accordance with paragraph (a) and the value similarly determined of the container in which they are contained.
“Sale price” is defined in section 2 of the Act and is applicable to calculating the additional duty on cigars manufactured in Canada. We understand [A Co] does not intend to manufacture cigars in Canada.
Questions on determining the value for duty of imported cigars should be confirmed with the CBSA. Provincial marking requirements should be confirmed with each province you intend to conduct business in.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the Act, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7281.
Yours truly,
Chris White
Excise Duty Operations - Tobacco Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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